2017 turned out to be a pretty good year for pharma and biotech stocks with the Nasdaq Biotechnology index and the NYSE ARCA Pharmaceutical index gaining 18.7% and 11.8%, respectively. Although the industry continued to face headwinds in the form of drug pricing scrutiny, pricing pressure, increasing competition, concerns regarding Amazon’s interest in entering the healthcare arena, fewer-than-expected acquisition deals and major pipeline setbacks, there were some positive developments as well. There was a significant surge in FDA approvals, investors appeared more comfortable with the drug pricing controversy and innovation won the day with the FDA granting approval to gene therapies for cancer as well as a rare form of blindness. Tax reforms are also expected to work in the sector’s favor with mergers and acquisitions (M&As) expected to pick up in the coming quarters.
New product sales ramp up, R&D success and innovation, continued strong performance from key products, growing demand for drugs especially for rare-to-treat diseases, an aging population and increased health care spending are some of the factors that should keep the momentum in 2018.
As we start the New Year, here is a look at three drug stocks that look well-positioned for 2018 and are witnessing upward estimate revisions and have a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or #2 (Buy).
Alkermes plc ALKS : Alkermes is focused on the development and marketing of treatments for central nervous system (“CNS”) diseases. Key disease areas include schizophrenia, depression, addiction and multiple sclerosis. Earlier this year, the company said that its current commercial business has the potential to generate revenues in excess of $2 billion into the 2020s.
Alkermes also a strong late-stage pipeline representing transformative catalysts in 2018. The company could gain FDA approval by June 30 for a NanoCrystal dispersion of Aristada (schizophrenia). Meanwhile, Alkermes expects to complete filing a rolling submission for ALKS 5461 (major depressive disorder) in January with a potential advisory committee meeting and FDA decision in the second half of the year. The company also expects to submit a new drug application (“NDA”) for ALKS 8700 (multiple sclerosis) in the second half of the year. Data on ALKS 3831 (schizophrenia) is also due this year (metabolic study data in the first half and ENLIGHTEN-2 data in Fall 2018) – the NDA submission for this candidate is scheduled for the first half of 2019. Alkermes has a global license and collaboration agreement with Biogen BIIB for ALKS 8700 for the treatment of multiple sclerosis.
Alkermes has seen the Zacks Consensus Estimate for 2018 earnings being revised 50% upward over the last 30 days. The company also beat expectations in two of the last three quarters with an average surprise of 75% and has an Earnings ESP of +46.48% for the fourth quarter of 2017. Alkermes, a Zacks Rank #2 stock, has seen its shares gain 5.9% over the last one year compared to the 1.5% rally of the industry it belongs to.
XOMA Corporation XOMA : XOMA is focused on the discovery, development and licensing of therapeutic antibodies. The company has several licensing agreements with other biotech and pharma companies which provide it with funds in the form of upfront and milestone payments and potential royalty payments. XOMA’s shares have been on an upward trajectory from August following the signing of licensing agreements with Novartis NVS for gevokizumab and intellectual property covering the use of IL-1 beta targeting antibodies in the treatment of cardiovascular disease. This deal resulted in XOMA receiving upfront payments including an equity investment. The agreement terms also resulted in a 50% reduction in XOMA’s outstanding debt through the repayment of its €12 million obligation to Les Laboratoires Servier and the extension of the company’s maturity date for its debt to Novartis by a couple of years. XOMA also stands to earn significant milestone payments and tiered royalties on sales of gevokizumab. Additional such licensing deals for the rest of the pipeline would be a major boost for the stock, which has seen its shares soar 587.9% over the past year.
Moreover, the Zacks Consensus Estimate for 2018 loss has been lowered 57.6% over the last 30 days. XOMA is a Zacks Rank #1 stock – you can see the complete list of today’s Zacks #1 Rank stocks here . XOMA has an Earnings ESP of +10.68% for the fourth quarter of 2017.
Eiger BioPharmaceuticals, Inc. EIGR : Clinical-stage biopharmaceutical company, Eiger, is focused on the development and commercialization of therapies for rare diseases. Some of the diseases being addressed by the company’s pipeline include hepatitis delta virus (lonafarnib and lambda), pulmonary arterial hypertension (ubenimex), post-bariatric hypoglycemia (exendin 9-39) and lymphedema (ubenimex). Regulatory and clinical announcements for all these programs are expected in 2018. The Zacks Consensus Estimate for 2018 loss for the Zacks Rank #2 stock has been lowered 6.7% over the last 30 days. Eiger’s shares are up 32.3% over the last one year.
While Eiger has surpassed expectations in three of the last four quarters, the Earnings ESP for the fourth quarter of 2017 is +0.73%.
